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1. Field of the Invention
The present invention relates to a system and method for generation of strategies of investment in publicly traded stocks and a method of choosing the strategy with capital gain greater than traditional buy and hold strategy. In particular, the invention combines a generation of strategies for day stock trading, method for calculation of capital gain for each strategy based on the historical stock quotes, method for automatic selection of the best strategy, method of fast visual dynamics and stability evaluation of such strategies versus time, and method for selecting stocks for investment potentially giving best capital gains.
2. Description of the Prior Art
Various business activities have needs to estimate and plan their business strategies and decisions especially in the area of investments. Investing in publicly traded stocks involves analysis of numerous strategies: what particular stock and when to buy or sell. The ability to perform accurate analysis or predict and choose the optimal strategy plays an important role in the future success. Most of investment decisions are based on the present and past historical data analysis. The typical approach is visualization of data in form of a graph of a parameter versus time, for example price per share for a certain stock versus time. The analysis is performed by calculating the trend of the data and extending the trend into the future, making buy, sell or hold decisions. The predicted trend depends on the multiple assumptions, parameters and conditions. Consideration of multiple combinations of the assumptions and parameter values leads to the comparison of hundreds and thousands graphs. It is difficult and time consuming for an investor or investment analyst to visually evaluate that many combinations of parameters for multiple stocks. As a result the investor or investment analyst is capable of performing only a partial analysis of a subset of the investment strategies and therefore the optimal investment strategy may be missed.
The present invention relates to a computer-based system and method for generation of strategies of investment in publicly traded stocks and a method of choosing the strategy with capital gain greater than traditional buy and hold strategy. The system calculates capital gains for different strategies in form of a strategy matrix using the historical stock data over a period of analysis. The strategy matrix size is typically 100 by 100 covering 10,000 investment strategies. The horizontal axis is responsible for raising stock price, the vertical one for declining stock price. Each axis is subdivided by 100 level. Each level represents a recommended sell price relatively to the opening stock price on the current trading day. The system calculates total capital gain for each of 10,000 permutations of strategies based on the historical data within the period of analysis.
The system calculates stock day sell limit orders for each strategy and for each trading day just after the stock market is open. The calculation is performed based on a formulaxe2x80x94G, FIG. 2, for sell limit or sell stop limit orders. Each order depends on the opening price of the stock versus the closing price on the previous trading day. If the stock gets sold during the trading day, the system automatically creates a recommendation to buy the stock back at the closing of the stock market. Then the system accumulates capital gains or losses for each strategy on a certain viewing date set by the user. The accumulated capital gain or loss is an element of the strategy matrix. Then the system performs the visualization of the strategy matrix by assigning a specific color and brightness to each matrix element. Then the matrix is displayed on the screen of the computer. Areas of the same color of the strategy matrix represent the same level of success for a number of strategies. The brightest pixel or pixels represent the best winning strategy or strategies delivering the maximum capital gain. The best strategy can be easily identified by the user by just looking at the displayed strategy matrix on a computer screen. It is also automatically calculated by the system and displayed in a special field on the computer screen.
The best strategy can be validated using the historical stock data by placing the viewing date in the past. The user can quickly and easily go from one viewing date to another one by scrolling the control bar. The system then recalculates and redisplays the strategy matrix on a new viewing date. The displayed strategy matrix changes with the speed of animation. The brightest spot on the strategy matrix may or may not change the its shape and position versus the viewing date. It gives an ability to quickly analyze the dynamic and stability of the best strategy. The stable position of the brightest spot on the strategy matrix means that the best strategy is stable versus time while changing shape or position of the brightest spot means that the best strategy is changing versus time. Of course, different stock may have different best strategies. Using the system on a PC with 200-300 MZ CPU the user can analyze 20-40 different views for 5-10 seconds, which otherwise with the traditional technique takes more then 10,000 plots, 20 samples each.